Equity release, where elderly homeowners tap their property for cash, is up 12
per cent on last year

Older homeowners' recovering confidence in the housing market - coupled with their increased need for cash to clear mortgages and meet other bills - has seen a surge in sales of "equity release" plans.

These enable older borrowers to raise cash against their home now, without having to make monthly repayments. Instead the interest owed - typically charged at a fixed rate - rolls up over the life of the loan. The total debt is cleared when the homeowner sells the property or dies.

One in five of those releasing equity say they need it to pay off uncleared mortgages as they reach the end of their term. Others say they need the money to maintain or improve their properties.

In the first half of 2013 homeowners used such schemes to draw £508m from their properties, up from £446m for the same period in 2012. A growing proportion of borrowers used "drawdown" arrangements, whereby bigger loans are initially agreed, with the facility to borrow more in future. If these "drawdown" lending facilities are included total equity released in the first half exceeded £650m. It is likely equity released for the whole of 2013 will exceed £1bn - for the first time since the financial crisis took hold in 2008.

The figures come from Key Retirement Solutions, the adviser specialising in the ocer-55 market. It said the number of arrangements entered into had also increased by several hundred, up to 9,500.

But the overall increase in total cash released was down to borrowers taking more money per transaction. This is born out by figures from the industry trade body, the Equity Release Council, in the graph below, showing individual loan sizes now at their largest - over £55,000 - since the onset of the financial crisis in 2008.

In the early phase of the crisis several large providers including Northern Rock ceased lending. There was also a fall in demand as borrowers feared house price collapses. But now both availability of equity release arrangements, and borrower confidence, appear on the rise. Dean Mirfin, a director at Key Retirement Solutions, said: "The sales trend is firmly up. But the values released continue to grow faster than sales, highlighting how customers are confident about making use of their property wealth."

Nigel Waterson of the Equity Release Council said: "More and more people are discovering how their housing equity can provide greater financial flexibility in retirement."

There are a number of critics of the growing equity release industry, who have warned that it should be considered as only one of several options. Releasing equity by downsizing to a cheaper property is often cited as a better alternative - although in many patrs of the cuontry this is impractical as bungalows and other properties most suitable for older owners are often, also, among the most expensive.

Just Retirement, another finance firm specialising in older customers, estimates two-thirds of householders aged over 65 - a group made up of six million individuals - own more than £100,000 in property equity.